By Paul A. Harris
St. Louis, Mo., Dec. 3 - Majestic Investor Holdings LLC priced $152.632 million of senior secured notes due Nov. 30, 2007 (B2/B) via Jefferies & Co. late Friday at 95 to yield 12 7/8%, according to Michael E. Kelly, chief operating and financial officer of Majestic. Net proceeds, factoring in the discount, are $145 million, the announced amount of the offering, Kelly said.
"We successfully priced the deal Friday afternoon, at a discount, so the interest rate on the face of the notes is 11.653%, but it's yielding 12 7/8%," Kelly said.
"We thought it was a very good deal," he added. "To give you a point of reference, we have $130 million worth of bonds currently outstanding at Majestic Star. Those currently have a yield to maturity of 12.65%. So we came in, literally, at the same pricing as our existing bonds. So we were very happy with that."
Noting that price talk on the new notes was 12 5/8%-12 7/8%, Kelly said that the new Majestic paper priced "within talk."
Initially the Majestic offering stipulated a seven-year maturity. However, Kelly said, it was shortened by one year to launch.
"When the reds were printed it actually went out with a six year maturity," he said. "So it has not changed during the length of the roadshow."
Asked to identify the most critical aspect of getting across the Gary, Ind. -based gaming firm's story regarding the acquisition of casino properties in Mississippi, Colorado and Las Vegas from Fitzgeralds, Kelly said it was convincing the accounts of the viability of entertainment and gaming.
"While the fundamentals of the assets we are buying are very strong, we believe, and similar to the property we currently operate in the Chicago marketplace, you have to sell through the fact that the tourist business, in general - and the entertainment business, across the country - seems to be in a state of flux, with the recent events of 9/11," Kelly commented.
"Would people continue to travel and enjoy entertainment and gamble? That was a question on a lot of people's minds. And when we showed them the recent financial performance of the (Fitzgerald's) properties they were very comfortable with the transaction.
"But there was some initial softness until we actually had a chance to show them what the properties had done."
Asked how heavily subscribed the deal was, Kelly said: "There's a wide dispersion of accounts. There are approximately a dozen different institutions involved."
| Issuer: | Majestic Investor Holdings LLC
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| Amount: | $152.6 million (face value)
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| $145 million (net proceeds)
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| Maturity: | Nov. 30, 2007
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| Type: | Senior secured notes
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| Bookrunner: | Jefferies & Co.
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| Coupon: | 11.653%
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| Price: | 95
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| Yield: | 12 7/8%
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| Call features: | Callable on Nov. 30, 2005 at 105.827 declining to par on Nov. 30, 2006, and
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| thereafter
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| Equity claw: | Three years for 35% at 111.653
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| Settlement date: | Dec. 6 (T+4) flat
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| Ratings: | Moody's: B2
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| Standard & Poor's: B
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| Cusip: | 560736AA8
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| End
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